Bitcoin Ordinals: Things you need to know

What are Bitcoin NFTs?

Introducing the groundbreaking Bitcoin ordinals protocol, pioneered by Casey Rodarmor in January 2023. This innovative protocol revolutionizes the way digital content such as art is permanently recorded on the immutable Bitcoin blockchain. Unlike traditional nonfungible tokens (NFTs) found on Ethereum and other blockchains, Rodarmor envisioned an on-chain presence that ensures the immutability of art, text, or video. A genesis ordinal, a captivating pixel art of a skull, meticulously inscribed by Rodarmor on December 14, 2022.

In the midst of the explosive growth of the NFT space driven by Ethereum's ERC-721 standard in 2021, visionary programmer and artist Casey Rodarmor recognized the untapped potential of the Bitcoin blockchain. Determined to offer a distinctive and unparalleled experience, Rodarmor embarked on a journey to create Bitcoin ordinals—a groundbreaking concept inspired by ordinal theory. Through tireless efforts and unwavering dedication throughout 2022, he successfully brought his visionary solution to life.

Ordinal theory revolutionizes the world of satoshis by attributing unique identities to these digital units, empowering them with traceability, transferability, and profound significance. The extraordinary rise of ordinals gained unprecedented momentum in February 2023, igniting a frenzy of excitement just six weeks after the creation of the groundbreaking genesis ordinal.

The meteoric ascent of Bitcoin ordinals, propelled the Bitcoin network into an unprecedented era of soaring usage, transaction fees, and storage demands, vividly depicted in the captivating chart displayed above. This revolutionary phenomenon holds immense potential to revolutionize the Bitcoin application landscape, transcending its conventional perception as a mere "store of value" and evolving into a dynamic and utilitarian force.

How do Bitcoin ordinals work?

Bitcoin ordinals are founded on the revolutionary theory of ordinals, which has breathed new life into satoshis (sats) and empowered them as indivisible entities within the dynamic realm of the Bitcoin blockchain. The transformative potential of ordinals, a sophisticated numbering scheme that elevates sats to their elemental form, paving the way for unprecedented possibilities in the world of digital currency. Bitcoin ordinals, where every satoshi becomes an atomic unit of immense value.

At the core of this groundbreaking theory lies the definition of satoshis (sats) as distinct atomic units that can be individually identified and seamlessly traded within the expansive Bitcoin network. With each Bitcoin (BTC) consisting of 100 million sats, the numbering of sats is intricately intertwined with the order of mining, granting them unique ordinal numbers that signify their distinct identities.

How to mine Bitcoin ordinals?

Mining, minting, or inscribing Bitcoin ordinals, is the captivating process that sets this digital realm ablaze. Distinguishable from the well-established minting of NFTs on the Ethereum blockchain, mining Bitcoin ordinals presents a thrilling challenge, characterized by its technical intricacies and the absence of user-friendly tools.

In the early stages of Bitcoin ordinals, the privilege of mining was exclusively reserved for those skilled in operating a Bitcoin node. To embark on this thrilling journey, tech-savvy individuals would set up a Bitcoin node, equipped with the cutting-edge ord app and a command line wallet, as their gateway to the captivating world of ordinal mining. These node operators would load their wallets with a reserve of sats, essential for covering gas fees, and engage in the mesmerizing process of inscribing their ordinals.

The convenience of user-friendly ordinal mining tools such as Gamma and Ordinals Bot, enable users to effortlessly upload their desired content for inscription and creation of personalized Bitcoin ordinals. Seamlessly navigate through a straightforward payment process facilitated by QR codes, making it accessible even to those with limited technical expertise. Embrace the simplicity of these innovative no-code mining applications and unlock the potential to create unique Bitcoin ordinals.

The landscape of Bitcoin ordinals tools is still in its infancy, having emerged only a few months ago when the genesis ordinals were first inscribed. However, as interest and adoption among everyday users and enthusiasts grow, the ecosystem and available tooling are expected to evolve and mature rapidly.

How to buy, sell, and trade ordinals

Similar to the process of minting Bitcoin ordinals, the trading aspect has yet to mature in terms of available tools. However, there are a limited number of tools available for trading these digital artifacts.

As the popularity of Bitcoin ordinals continues to rise, most trades have predominantly occurred through over-the-counter channels. Notably, collections like "Planetary Ordinals" and "Bitcoin Punks" among the first 1,000 inscriptions were primarily exchanged without relying on established NFT marketplaces such as OpenSea or Blur.

Nevertheless, platforms such as the Ordinals Wallet, Hiro, and Xverse have emerged, allowing users to buy and sell Bitcoin ordinals. Within these platforms, users can conveniently purchase sats using on-ramp payment plugins and seamlessly engage in transactions for buying and selling ordinals. Explore these tools to participate in the growing market of Bitcoin ordinals and unleash the potential of this innovative digital asset class.

How have ordinals been perceived by the broader Bitcoin ecosystem?

Bitcoin ordinals represent a groundbreaking innovation that showcases the diverse range of applications unique to the Bitcoin blockchain, sparking increased interest and involvement from developers who are eager to create the necessary tools to serve users.

The phenomenon surrounding Bitcoin ordinals has undoubtedly experienced a surge in attention, reaching its potential peak around February 2023, as indicated by transaction data. However, the excitement surrounding the Bitcoin blockchain application layer is just beginning.

A noteworthy example is the notable price surge of Stacks (STX) following the ordinal frenzy. The Bitcoin ecosystem is still in its early stages of development. However, if developers continue to be drawn to the blockchain, the network effects between developers and users could evolve and flourish, potentially aligning with the upcoming cryptocurrency cycle.

Ordinals vs. traditional NFTs

Bitcoin ordinals, as previously mentioned, serve the purpose of uniquely identifying satoshis (sats) and storing content or artwork directly on the blockchain. In contrast, Ethereum's ERC-721 standard for NFTs typically keeps the metadata or a reference to the artwork off-chain. While some Ethereum NFTs are exploring on-chain storage, they remain exceptions.

Another notable distinction of Bitcoin ordinals is their approach to rarity and pricing within the NFT space. In traditional Ethereum-based NFTs, the rarity and subsequent value of an NFT are often determined by the attributes of the artwork. For example, limited supply drives the value of NFTs like Ethereum Name Service (ENS).

However, with Bitcoin ordinals, pricing is influenced by significant moments represented by Bitcoin blocks. The first 1,000 or 10,000 inscribed ordinals may hold substantial value for collectors. It wouldn't be surprising to witness the Genesis Bitcoin ordinal being sold for several million dollars. Additionally, certain sats would be considered more precious than others.

The founders of Bitcoin ordinals propose a simple framework for determining rarity based on key events and the ordinal inscribed. The first sat of each new block is rarer than the other sats in that block. The first sat of an adjustment period, which occurs approximately every two weeks, is even rarer. As the next halving is scheduled for 2024, the first sat of each halving epoch adds another level of rarity. Finally, the first sat of the adjustment period, which occurs once every six halvings (around every 24 years), introduces an additional level of rarity. According to the founders, this approach differentiates Bitcoin ordinals from NFTs, ensuring true randomness in rarity rather than being controlled by the founding teams or artists behind nonfungible token collections.

This understanding sheds light on why the initial activity surrounding Bitcoin ordinals may have already reached its peak in the short term. However, observing remains intriguing to observe how the activity will ramp up as we approach the Bitcoin halving in 2024, presenting new opportunities within the Bitcoin ordinals ecosystem. Stay tuned for exciting developments in this space.